Reader Mail: Starting and Sticking to a Budget

I live with my awesome, wonderful boyfriend who just found out that his awesome, wonderful full-time job that he loves has been downsized to part-time. Thankfully, our rent is pretty cheap (LES, represent!) and my job is stable (fingers crossed, amirite!?), but neither of us has much in the way of savings. Right now, his main concern is not to burden me while he’s “underemployed,” but I think this is a great opportunity for both of us to become more financially responsible. Unfortunately, creating a household budget seems like a daunting task to me. Any advice on making one (and sticking to it)? — V.K.

I get budgeting. It’s great, and I do it. But what percentage of your income are you supposed to spend on rent/food/commuting/bills/booze benders each month? I need some sort of benchmark because I know how much I spend, but I need to know if that’s okay. For example, I live in London where rent is outrageously high, but I don’t know if what I’m paying is above average, or just normal, relatively speaking. Do I need to feel guilty about that £45 weekday dinner out? Or can I relax a little. When I was growing up we never had much money, and I’ve had little to no money education. These days I’m making my own cash and it’s great and everything but I just don’t really have a measure on what is the done thing. — D.B.

So … any budgeting suggestions? I’ve taken a few different tacks but it feels like it’s never enough to get me on really solid footing. What I would like is to have a clearly outlined budget where I’m never scrambling to cover my ass. Which sounds like it should be easy considering I don’t even pay rent! — A.P.

I’ve been getting lots of questions lately asking me for tips on how to create—and stick—to a budget (in fact, I just got another one five minutes ago—hello Kathy!), and I’m going to tell you something that may sound surprising: I don’t use a budget. Some people need to have a budget to remain responsible with their money, while others find budgets to be too restrictive for their individual needs. I’m one of those people who find budgets too restrictive.

Of course, this doesn’t mean I don’t limit my spending—it means I’m not going to put an arbitrary dollar amount to a category like “grocery shopping” and make myself stick to it every week. Sometimes I want to spend $100 at the grocery store, and sometimes I want to spend $25. Every month, I set aside enough money to pay my rent and other household bills, and sock at least 20 percent of my income into various savings accounts. Whatever money that’s leftover—a fair amount—can be used however I want.

I’ve tried creating budgets for myself before, but was never able to stick to them. I wasn’t overspending—I was just spending irregularly. I would go half a year without buying a single article of clothing, and then decide I could drop $200 to replace my shirts that had torn away at the elbow, and new socks to replace the ones that have worn away at the heel (for me, it is always the heel, and never at the toes). In the month where I was dropping money on clothes, I would automatically adjust my other spending—fewer drinks and nights out with friends.

Budgets never worked for me because my circumstances changed frequently. For example, I have two weddings to attend in California next month, which means 10 days at my folks’ place where I don’t have to do any grocery shopping and get to eat for free (besides a visit to In-N-Out, and that great Mexican food joint on the corner). As long as I’m paying the bills, getting some money into savings, and not running out of money at the end of the month (which has yet to happen on my budget-less modus operandi), I’m ahead of the game.

So if you’re paying your bills, and saving at least 20 percent of income, you really don’t need a benchmark for how much you should be spending on weekday dinners out, shopping, or whatever it is you like to do. Everyone’s different. I have a higher spending benchmark for grocery shopping than other people I know because I love to cook, and I like purchasing quality ingredients. But I have a very low spending benchmark for things like going to the movies or shopping for clothes, which balances that spending out.

Of course, if you find yourself running out of money before the end of the month, you’ll need to start putting some limitations on your spending, AKA set a budget. Spending too much on dining out? Set yourself a weekly limit you can spend on dinner with your pals, and then don’t go out to dinner again after you’ve reached that limit.

You might want to give the envelopes system a go: Look at your how much take-home money you get every month in your paycheck. Set aside what you need to pay your bills in your checking account, put at least 20 percent away for savings if you can, and then divvy up the rest of your money into envelopes for the rest of the things you’re spending your money on: groceries, dining out, shopping, entertainment, transportation, etc. If you find yourself spending much more in one category than in another, you can adjust the amount of money you put in each envelope accordingly. But remember, once that money’s gone, there’s no dipping into your savings. Unless you’ve run out of food to eat, the spending has to stop or you’ll begin to dig yourself into a hole.

The envelopes system works well for a lot of people because it makes spending money tangible. We often swipe our credit or debit cards without thinking about the money coming out of our bank accounts. Handing a cashier real cash hurts just a tiny bit more—especially when you go home later and see what’s left in your envelopes.

Again, I’m the sort of person who works best without a budget, so you have to do what’s right for you. If you have your own genius budgeting system, I’d love to hear them.